A revolution on the wards that could heal our public services

One Cambridge hospital shows what can be achieved by ending the curse of state
monopolies

Hinchingbrooke Hospital in Cambridgeshire, previously described by ministers as “a clinical and financial basket case”, has been turned around – from the worst in the region to the bestPhoto: Rex Features

At the height of the G4S security fiasco, I am told – by a reliably authoritative Labour figure – that some in the shadow cabinet were pressing their leader to stir up an even bigger row about the role of the private sector in public work. The operation was postponed, on the grounds that voters didn’t want politics during the Olympics. But once the Games were over, said the leadership, the battle could start.

A spanner has been thrown in the works, however. Hinchingbrooke Hospital in Cambridgeshire, previously described by ministers as “a clinical and financial basket case”, released its latest performance data yesterday. In just six months, waiting times had been turned around – from the worst in the region to the best. Patient care had improved; satisfaction ratings were higher than ever. Money was no longer being wasted. Staff morale was up. Even the unpopular car parking fees had been scrapped.

The reason? Last year, Hinchingbrooke was taken over by the private sector. Under a new employee-ownership deal, hospital staff became part-owners of the managing company, Circle, so all had a personal stake in making the project a success. Yesterday, Circle announced the opening of a new hospital in Reading, using the same model – meaning more good news for patients.

The Left is hoping that over the coming months, people will ignore Circle and focus on G4S. The Labour MPs Keith Vaz and Margaret Hodge, who chair powerful Commons committees, have summoned the firm, plus Olympic organisers and others, to televised grillings about what went wrong. These will start on September 11 – chosen, I’m sure, to make a statement about public security. Labour wants to implicate Theresa May in the fiasco while the issue is fresh in people’s minds.

It’s all good, mid-term Opposition politics, and there’s plenty of other ammunition to hand. Since the election, we’ve seen the collapse of the care home operator, Southern Cross, and allegations of fraud at A4e, the welfare contractor. Some on the Left believe they can use these to portray the whole public services reform agenda and the involvement of the private sector as poison.

Yet apart from its own patchy record on private sector contracting (think the PFI deals that are currently bankrupting hospitals), Labour’s problem on this issue is a lack of internal clarity. Blairites, fearful that their influence is diminishing, want to keep the reform flag flying. They bemoan the Tories’ capture of the radical tag on schools, hospitals and welfare, which Tony Blair fought so hard to set in train. Others, closer to the unions, want to distance Labour from all of it and go for

out-and-out attack.

But the real issue here comes back to G4S itself. The firm is following the right post-crisis formula: admit you’re wrong, apologise, and try to put things straight. It is paying back some public money. Still, the brand has taken a serious battering, and it will be politically difficult to grant it further contracts for the immediate future.

Compare this with how the public sector behaves when it gets things wrong. At the Department for Work and Pensions, the Government’s auditors recently refused to sign off the accounts, because civil servants had lost nearly £5 billion of taxpayers’ money through bodges such as the overpayment of benefits. This is a massive amount of money – but nobody will resign. Nor has there been much media attention. Why? Because the same thing has happened every single year for a quarter of a century. It’s the norm.

This is the single biggest reason to reject the Left’s argument that public service outsourcing must be stymied. As Hinchingbrooke shows, the right kind of reform can turn around shoddy government monopolies and transform them into huge success stories. Yes, there are problems with outsourcing – but the answer is not to rein it in, but to be more radical still.

Yesterday, a very timely report emerged: a group of MPs on the Public Accounts Committee criticised the Government’s drive to release lots of performance data about our public services. It said that information is being dumped in formats that people can’t easily use, especially when choosing between important services, such as care homes.

The Government’s aim is that innovators will see all this data and react by producing the kinds of applications that will tell us which care homes are indeed up to scratch. But creating consumer-style behaviour requires much more active intervention, at least until trusted markets develop. We need a kick-start, such as a national competition for providers such as uSwitch or consumer groups like Which? to link up with services such as the NHS (in a mutual like Circle, perhaps?) and get on with creating comparison sites for different providers of public services now.

This principle applies not just to data or outsourcing, but public sector contracting too. There is a tendency in departments to try to open up procurement to create new markets (and cheaper and more efficient public services), under the assumption that lots of different providers will naturally respond. But few genuinely new and transformative providers, practices or technologies – or small organisations such as charities – are able to get a significant stake.

When I was working within Downing Street, it always struck me that Andrew Lansley was the one minister pushing through big public service reform who really grasped the importance of this. His biggest achievement was to create an independent regulator charged specifically with overseeing competition in the NHS. This one policy actually caused almost all the controversy over his reforms – even though it means that people using the NHS will end up being better protected and more empowered.

With independent oversight in place, government bureaucrats are unable to prevent new innovative providers entering the market to expand people’s choices. The regulator can also prevent a small clique of giant providers emerging. Instead, the market will be shaped by real people’s choices – and the likes of Circle will be able to spread their good work.

This needs to happen everywhere. Independent regulators, unlike Whitehall departments, protect the interests of the people, not the Civil Service. The Office of Fair Trading has been doing this job for consumers for years, but very rarely ventures into the highly political world of public services. An OFT-style regulator in every major public service would really champion the people, breaking up the monopolies that produce vast one-provider contracts. Even at the local level, they could counter the arbitrary political blockages that new providers face, such as those trying to set up new schools under Michael Gove’s excellent plans.

The real lesson from the problems we’ve seen is that we need more reform, not less: more transparency over contracts, more independent oversight of markets; more interventions to make people’s choices a reality. The forthcoming inquest over G4S will no doubt produce political theatre. But let’s keep our eyes on why we needed to end government monopolies in the first place: because people want and deserve better.

Sean Worth is a former special adviser to the Prime Minister and currently runs the Better Public Services Project at Policy Exchange